20 years: Chartered accountant & educator
The objective of IFRS 9 Financial Instruments is to establish principles for the financial reporting of financial assets and liabilities. In this video, Saket explains what these principles are and how each provide useful information to users of financial statements for their assessment of the amounts, timing and uncertainty of an entity’s future cash flows.
The objective of IFRS 9 Financial Instruments is to establish principles for the financial reporting of financial assets and liabilities. In this video, Saket explains what these principles are and how each provide useful information to users of financial statements for their assessment of the amounts, timing and uncertainty of an entity’s future cash flows.
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12 mins 19 secs
The objective of IFRS 9 Financial Instruments is to establish principles for the financial reporting of financial assets and financial liabilities that will present relevant and useful information to users of financial statements for their assessment of the amounts, timing and uncertainty of an entity’s future cash flows.
Key learning objectives:
Outline the objective of IFRS 9, and what it covers
Understand how financial assets and liabilities are measured and classified
Identify the three approaches to applying the IFRS 9 expected credit loss model
Identify the three types of hedges in IFRS 9
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The standard covers the following key areas:
Financial assets are initially measured at fair value plus or minus, in the case of financial assets not at fair value through profit or loss, transaction costs. There are three categories for classification of financial assets:
Equity instruments held for trading are classified as fair value through profit or loss. If it is not held for trading, there is an irrevocable option to designate the asset on initial recognition at fair value through other comprehensive income. Derivatives are classified as FVTPL unless they are effective hedging instruments in certain hedges.
Financial liabilities are initially measured at fair value plus or minus, in the case of financial liabilities not at fair value through profit or loss, transaction costs. There are two categories for classification of financial liabilities:
All trading liabilities and derivatives (unless they are effective hedging instruments in specific hedges) are mandatorily classified as FVTPL.
Expected credit losses = Exposures at default (EAD) x Loss-given default (LGD) x Probability of default (PD)
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